The centre will soon appoint merchant bankers to invite bids from institutions, which will help the government set a floor on the price at which the shares will be sold. IOC share capital stands at Rs 389.3 crore, of which 10 per cent will be offloaded.

"We can easily allocate 10 per cent of our mandated funds for market operations for purchasing Indian Oil shares," an insurance source said. Banks which are flush with funds because of poor credit growth will be only `too happy' to purchase Indian Oil shares withhard cash, as it falls within their stipulated 5 per cent exposure limit for equity.

However, analysts say IDBI, ICICI and IFCI will be at a disadvantage to spare cash for the programme owing to higher cost of funds. Instead, these institutions have assured finance minister Yashwant Sinha, who had a hour-long discussion with them in the city last week, that they will act as underwriters.

"After all, it will be easier for these institutions to sell these shares to their clients,'' sources said. This is as good as institutions' direct participation in the whole process.

Since different institutions' chiefs had suggested various modes of participation, Sinha had asked IDBI, ICICI and UTI to coordinate with the institutions about their options.

Sinha has asked the three institutions to give their proposals in writing. While IDBI chief GP Gupta has suggested the underwriting route, UTI's Subramanian mooted a warehousing approach, by which the trust can buy out the stake in the first stage and offload it inthe market, later.

However, ICICI's Kamath has strongly advocated the setting up of a special- purpose vehicle to undertake the entire disinvestment programme of Rs 5,000 crore in the current fiscal.

According to ICICI, the special-purpose vehicle can be set up with the government holding a 49 per cent stake and the rest being held by banks and institutions. With the minority holding of the government, the special-purpose vehicle can run its business without ministerial meddling.

IOC's GDR issue has been hanging fire for the past two years. The first time round, it was the oil-pool crisis that would have deterred investors from subscribing to the equity of the corporations, whose outstandings from the pool had shot to Rs 10,000 crore. Consequently, the corporation could not go ahead with its 10 per cent public issue, which, in early 1997, would have raked in Rs 2,000 crore.

The government of India holds 91 per cent in the corporation, and analysts say it will be an interesting turn of events whenafter the current disinvestment schedule, a special-purpose vehicle will be put in place for the corporation.